Hrb Ta1

1. Depreciation ends when depreciable property is taken out of service. All of the following events will stop the depreciation of a machine EXCEPT:

o The sale or exchange of the machine.

o Abandonment of the machine.

o Lack of a market for the product the machine is used to make.

o The machine is destroyed in a fire.

2. Which of the following is NOT a test for an employee business expense?

o The expense must be paid or incurred during the employee's tax year.

o The expense must be for the employee's convenience.

o The expense must be incurred because the taxpayer is an employee.

o The expense must be ordinary and necessary.

3. Which of the following military expenses is NOT deductible?

o Insignia of rank.

o Travel expenses when working as a courier.

o Haircut when required by military regulations.

o Reserve component uniforms, if the taxpayer can wear the uniforms only while performing duties as a reservist.

4. In regard to combat zone pay, military members may:

o Elect to include it as earned income when calculating the Earned Income Credit.

o Exclude it from taxable income if they remain in a combat zone for at least one month.

o Exclude it from income for purposes of the Additional Child Tax Credit.

o Carry over excluded income to be treated as earned income for up to two years.

5. How does depreciation impact basis?

o Depreciation decreases basis.

o Depreciation increases basis.

o Basis is not impacted by depreciation.

o None of the above.

6. If a taxpayer has taxable income from cancellation of a business debt in a non-farm rental activity, where would the income be reported?

o Form 1040, line 21.

o Form 1040, Schedule F, line 10.

o Form 1040, Schedule E, line 3b.

o Form 1040, Schedule C, line 6.

7. In which case below will the taxpayer be able to exclude all income from their cancelled debt?

o A client: Received a Form...